Contract Termination Costs M&S

With cost-cutting still a priority for many businesses, the prospect of changing suppliers for recurring services is often attractive as it may offer the scope to reduce costs. However, it is important when considering such switches to make sure that the contract terms are carefully considered.

In a recent case, retail giant Marks & Spencer (M&S) wished to terminate a contract for computer maintenance. M&S believed that the contract operated to give it a choice as to whether to renew the maintenance agreement at the year end, but instead it required M&S to give notice prior to the end of the year if it wished to terminate the contract.

M&S did not give notice at the required time and as a result was liable for the payment due under the contract for the next year’s maintenance – more than £130,000.

It is always worth taking legal advice when you are considering terminating a contract to ensure you do not end up with unexpected liabilities.